Landlords

Income Tax, Personal Allowances and Employee National Insurance The Chancellor has opted to freeze income tax thresholds again, extending the freeze on personal allowances and higher-rate tax thresholds until 2028. This move means that, as inflation pushes wages up, more people may find themselves in higher tax brackets over time. There is no change to employee national insurance rates. National Minimum Wage (NMW) From April 2025, NMW will be increasing to £12.21 per hour for eligible employees, with the rates for 18-20 year olds increasing to £10.00 per hour and under 18s and apprentices to £7.55 per hour. Employers must make sure they are meeting these minimum rates. Employer National Insurance Contributions From April 2025, the main rate of employer national insurance (NI) will increase from 13.8% to 15% and the threshold at which contributions begin will reduce from £9,100 to £5,000 per year. For an employee earning more than £9,100, this is an increase in NI of at least £615 per year. The impact of this on small businesses has been reduced with an increase in the employment allowance from £5,000 to £10,500 per year. The employment allowance is a reduction in employer NI contributions. The employment allowance is currently only available to employers with less than £100,000 of employer NI contributions in the previous tax year but this restriction will be removed from April 2025. However, those companies with only one employee paid above the NI threshold where that employee is a director are not eligible for the employment allowance so this will affect many small consultancy businesses. Corporation Tax The government has published a Corporate Tax Roadmap that includes a commitment to cap the corporation tax main rate at 25%, maintain the small profits rate and marginal relief, maintain full expensing and annual investment allowance for capital purchases, and R&D relief rates. The Roadmap also shows that there is an intention to simplify tax administration for companies. Capital Gains Tax (CGT) Changes to CGT were a major talking point prior to this year’s budget with the rates increasing from 30 October 2024 to 18% (previously 10%) in the basic rate band and 24% (previously 20%) in the higher/additional rate bands. This aligns the rates for other assets with the rates already in place for disposals of residential property. Business Asset Disposal Relief (BADR) and Investors’ Relief (IR) will increase from 10% to 14% from 6 April 2025 and to 18% from 6 April 2026. The lifetime limit for IR has reduced to £1m which is in line with BADR. Stamp Duty Land Tax (SDLT) The higher rate charged on purchases of additional dwellings has increased to 5% (previously 3%) from 31 October 2024. For companies purchasing dwellings costing more than £500,000, the rate has also increased from 15% to 17%. The SDLT thresholds were already due to reduce from 1 April 2025 because the current thresholds were a temporary measure from September 2022 to 31 March 2025. Inheritance Tax (IHT) There are changes to agricultural property relief and business property relief from 6 April 2026 whereby 100% relief is only available for the first £1m of assets, reducing to 50% thereafter. Unused pension funds will be brought into the value of estates from 6 April 2027. The nil rate band will remain at £325,000 and residence nil rate band at £125,000 until April 2030. Non-UK Domiciled Individuals As previously announced, the remittance basis of taxation (where non-UK domiciled individuals could elect to pay tax only on their UK sourced income/gains and any remittances made to the UK) will be removed from 6 April 2025. Other Points Making Tax Digital (MTD) for Income Tax will be extended to the self-employed and landlords with turnover of more than £20,000, although no date has been given for this. You can read more about MTD in our previous blog . ISA subscription limits are frozen until 2030. The interest rate for unpaid tax will increase to 9% (currently 7.5%) from April 2025. There will be a focus on non-compliance with additional compliance staff being recruited at HMRC and a clear message about reducing the tax gap. We will likely see an increase in ‘one to many’ letters which HMRC send to individuals to prompt them to consider whether their tax affairs are up to date. Conclusion With a host of tax changes impacting both individuals and businesses, planning ahead is crucial. Whether you’re affected by the income tax freezes, NI rises or CGT increases, taking steps now can help you make the most of available reliefs and avoid potential pitfalls. If you’d like tailored advice on navigating the Autumn Budget 2024, don’t hesitate to reach out. We’re here to help you make the most of the new regulations, ensuring you’re well-prepared for the financial year ahead.

General Principles for Claiming Expenses In our previous blog we gave some examples of general expenses that can be claimed. You can read that here . Essentially, the costs need to be for the purposes of generating income for your property business. Property Business Specifics Professional Services The costs of professional services directly related to the management of your rental properties are deductible. This can include fees for legal, accounting, and management services. Examples of allowable professional fees: Letting agent fees for managing the property. Legal fees incurred for drafting tenancy agreements or handling evictions. Accountancy fees for preparing profit calculations or offering financial advice. Legal fees for acquiring or selling properties are not deductible as running costs but will likely qualify as capital costs to reduce capital gains tax when selling. Repairs and Maintenance The cost of work that keeps your property in good condition is allowable but not improvements as these will be capital and may be allowable costs to reduce capital gains tax when selling. Examples of allowable repairs and maintenance expenses: General repairs to fix wear and tear, such as replacing a broken window or mending a roof. Painting and decorating to maintain the property in a habitable state. Servicing of appliances like boilers or electrical fittings. Running Costs As a landlord, you will incur various running costs associated with letting out your property. These expenses are typically allowable as long as they are directly related to the day-to-day operation of your rental business. Examples include: Utility bills: If you, as the landlord, pay for electricity, water, or gas on behalf of tenants. Insurance: Including landlord’s insurance, which covers buildings, contents, and public liability. Council tax and other local authority charges (if paid by the landlord). For property companies that manage multiple units, running costs might also include administrative expenses like software subscriptions or office supplies. Travel Expenses If you need to travel to your rental property for inspections, maintenance, or meetings with tenants or agents, you can claim travel expenses. Allowable travel expenses include: Mileage if using your personal vehicle for property-related visits. Public transport costs such as train or bus fares. You should keep detailed records of your trips, including receipts and the purpose of the visit, as HMRC may request evidence of your travel. Advertising and Marketing Finding new tenants often requires advertising and marketing efforts, and these costs are also deductible. Whether you’re paying for: Listings on property websites Leaflets or other promotional materials Paid social media ads Replacement of Domestic Items Relief The Replacement of Domestic Items Relief allows you to deduct the cost of replacing furnishings, appliances, and other household goods. It is not available for the initial purchase of these items. This relief is only available for items provided for the tenant’s use, such as: Furniture (e.g. sofas, beds, and wardrobes) Appliances (e.g. washing machines, fridges, and dishwashers) Kitchenware (e.g. crockery, cutlery, and utensils) Finance Costs (Mortgage Interest) Individuals with mortgaged rental properties cannot deduct the full mortgage interest as an expense against their rental income. Instead, a maximum of 20% can be claimed as a tax relief. Property companies can still deduct mortgage interest as an allowable expense so full tax relief is available. Capital vs. Revenue Expenses It’s essential to distinguish between capital expenses and revenue expenses. Capital expenses are costs related to acquiring, improving, or selling a property (e.g. extensions or adding new rooms), and these are not deductible from your rental income. Instead, they may be claimed against Capital Gains Tax (CGT) when you sell the property. Revenue expenses, on the other hand, are related to the day-to-day running of your rental business, and these are allowable for deduction from your rental income. Conclusion It’s important to keep records of the costs, including photos of the work done where the may be a question of whether a cost is revenue or capital. CJL Accountancy are a specialist accountant for landlords, who can help navigate the complex tax rules and keep your accounting records clear and up to date.

From April 2025, holiday lettings will be treated as normal residential properties and taxed like them which means the tax benefits will be lost. Mortgage Interest Relief Mortgage interest is an allowable expense when calculating rental profits for an FHL but this will be removed from April 2025. If your holiday let has a mortgage and you’re a higher/additional rate taxpayer then you’re likely to pay more tax. Expenses Capital allowances can be claimed for FHL’s which is tax relief for fixtures and fittings but this is not available for usual residential properties. Capital Gains The sale of an FHL property would potentially qualify for Business Asset Disposal Relief which means capital gains tax (CGT) could be as low as 10%. From April 2025 the usual CGT rates for residential property will apply. At the time of writing that’s 18% at the basic rate and 24% at the higher rate. There is speculation that these rates may be increased at the Autumn Budget. Pension Contributions Pension contributions can be made up to your relevant UK earnings (or £3,600 if earnings are lower). FHL profits count as relevant UK earnings so this means you are able to save more into your pension and get tax relief but this will be lost from April 2025. If you’re looking for advice on how this affects you then contact us.

Registering For Self-Assessment If you started your business between 6 April 2023 and 5 April 2024 then you’ll need to register for self-assessment by 5 October 2024. Filing Your Tax Return If you need to file a tax return for the 2023/24 tax year then the deadline is 31 January 2025. Penalties will be charged for late filing. Tax Payments If you have tax payable for the 2023/24 tax year then the due date is 31 January 2025. If you owe over £1,000 then you may need to make payments on account for the 2024/25 tax year on 31 January and 31 July 2025. Interest and penalties will be charged for late payment. Getting Organised If you need an accountant to help with your 2023/24 tax return then don’t delay. Selling a UK Residential Property You may need to file a Capital Gains Tax (CGT) return and pay the tax by 60 days after completion. If you need an accountant to help with your CGT return then speak to them before completion or very soon after to avoid missing the deadline. Penalties will be charged for late filing. Interest and penalties will be charged for late payment.

The tax landscape for landlords is complex and understanding your tax obligations is crucial for staying compliant and optimising your financial position. This guide will walk you through the key tax considerations for landlords in the UK. Income Tax on Rental Income As a landlord, you are required to pay income tax on the profit you make from renting out your property. Your rental income must be declared on a self-assessment tax return for the tax year (6 April to the next 5 April) and this needs to be filed by the next 31 January. The profit is calculated as your total rental income minus allowable expenses. Any tax liability must be paid by the tax return filing deadline and you may also need to pay payments on account for the next tax year on 31 January and 31 July. Allowable Expenses Allowable expenses are costs that you can deduct from your rental income to reduce your tax bill. These include: Letting agent fees and management fees Property repairs and maintenance (but not improvements) Ground rent and service charges Council tax, insurance, and utility bills (if paid by the landlord) Accountancy fees for preparing rental accounts If costs are below £1,000 then the property allowance can be claimed in place of actual expenses. Mortgage Payments Only the interest element of mortgage payments can be claimed, not the capital repayment. If you have an interest only mortgage then this will be the whole payment. The mortgage interest is not allowable as a deduction from your rental income but a basic rate tax relief can be claimed. This means the tax relief is restricted for higher or additional rate taxpayers. Capital Gains Tax (CGT) on Property Sales If you decide to sell a rental property, you may be liable to pay CGT on the profit (gain) you make from the sale. CGT is payable on the difference between the sale price and the original purchase price, minus allowable costs such as: Solicitor and estate agent fees Costs of improvement works (but not routine repairs) Stamp Duty Land Tax (SDLT) paid on purchase The CGT rates for residential property at the time of writing are: 18% for gain in the basic tax rate 24% for gain in the higher or additional tax rates Every individual has an annual CGT allowance (£3,000 for 2024/25), which can be deducted from your total gains before calculating the tax. If the property was at any time your main residence, you may be eligible for Private Residence Relief (PRR), which can reduce the taxable gain. A CGT return may need to be filed within 60 days of completion when a UK residential property is sold, and any CGT paid by the same date. Penalties will be charged for late filing and payment. Making Tax Digital (MTD) The UK government’s Making Tax Digital (MTD) initiative will require some taxpayers, including landlords, to maintain digital records and submit tax returns electronically. Landlords with gross income above £50,000 must comply with MTD for Income Tax from April 2026, and those with gross income above £30,000 from April 2027. See our previous post for more about this. Properties Held In Companies You may wish to build your property portfolio in a limited company which can be especially useful if you are a higher/additional rate taxpayer and do not need to access the profits immediately. You should be aware of the following: If you already own the property(s) then there can be tax payable on transfer into a limited company. If any property is valued over the Annual Tax on Enveloped Dwellings (ATED) threshold then you’ll need to file an ATED return each year and may have additional tax to pay. The threshold is £500k at the time of writing. The mortgage interest restriction is not relevant for properties held in companies. The company will pay corporation tax on profits. Conclusion Navigating the UK’s property tax landscape as a landlord can be challenging, but understanding the key tax rules and planning ahead can make a significant difference. Whether it’s optimising allowable expenses, planning for CGT, or preparing for MTD, staying informed and seeking professional advice is essential for minimising your tax burden and maximising your rental income.